Financial Transactions Of Park Health: Balance Sheet And Income Statement Analysis

Park Health’s financial transactions for the quarter ended 30 June, 2018

Transaction Analysis Chart

Date	Assets	Liabilities	Owner’s equity Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper
April 1	Cash increased by $160,000		Capital increased by $160,000
April 2	Cash decreased by $36,000	Land & building increased by $360,000	Long term loan increased by $324,000
April 3	Cash decreased by $21,600, Prepaid expenses increased by $3,600, Office equipment increased by $18,000
April 4	Cash decreased by $5,400, Prepaid expenses increased by $2,400, office stationery increased by $860	Accounts payable increased by $860
April 5	Motor Vehicle increased by $30,000	Accounts payable increased by $30,000
April 12	Accounts receivable increased by $2,000		Revenue increased by $2,000
April 13	Computer Equipment increased by $4,500		Capital increased by $4,500
April 16	Accounts receivable increased by $3,500		Revenue increased by $3,500
April 17	Cash increased by $2,000, accounts receivable decreased by $2,000
April 30	Cash decreased by $2,800	Long term loan decreased by $1600	Interest expenses increased by $1200
May 1	Cash decreased by $2,400, accounts receivable increased by $9,800		Drawings increased by $2400, revenue increased by $9,800
May 3	Cash decreased by $860	Accounts payable decreased by $860
May 10	Cash decreased by $900	PAYG tax liability increased by $300	Wages expense increased by $1200
May 24	Cash increased by $5,800, accounts receivable decreased by $5,800
May 26	Cash decreased by $320		Telephone & internet expenses increased by $320
May 30	Cash decreased by $2800	Long term loan decreased by $1600	Interest expenses increased by $1200
June 2	Accounts receivable increased by $9,200		Revenue increased by $9,200
June 9	Cash decreased by $1300	PAYG tax liability increased by $500	Wages expense increased by $1800
June 16	Cash increased by $7820, accounts receivable decreased by $8400		Motor vehicle expenses increased by $580
June 25	Cash decreased by $2800		Drawings increased by $2800
June 30	Cash decreased by $2800	Long term loan decreased by $1600	Interest expenses increased by $1200
June 30	Accumulated depreciation office equipment increased by $1350		Depreciation expense increased by $1350
June 30	Accumulated depreciation furniture increased by $75		Depreciation expense increased by $75
June 30	Accumulated depreciation computer equipment increased by $338		Depreciation expense increased by $338
June 30	Accumulated depreciation motor vehicle increased by $1500		Depreciation expense increased by $1500
June 30	Prepaid expenses decreased by $2400		Expenses increased by $2400
June 30	Office stationery decreased by $500		Office stationery expense increased by $500
June 30		Utilities payable increased by $680	Utilities expense increased by $680

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Park Health
Income Statement
For the Quarter ended 30 June, 2018

Sales		$ 24,500
Less: Expenses
Wages expenses	$ 3,000
Professional Indemnity Insurance	$ 600
Telephone & Internet Expense	$ 320
Motor Vehicle expense	$ 580
Medical Journals subscription expense	$ 1,800
Office stationery	$ 500
Utilities expense	$ 680
Depreciation – Office Equipment	$ 1,350
Depreciation – Office Furniture	$ 75
Depreciation – Computer Equipment	$ 338
Depreciation – Motor Vehicle	$ 1,500
Interest Expenses	$ 3,600	$ 14,343

Net Profit		$ 10,158

Park Health
Balance Sheet
As at 30 June, 2018

ASSETS		LIABILITIES
Current		Current
Cash at Bank	$ 95,640	Accounts payable	$ 30,000
Accounts receivable	$ 8,300	PAYG payable	$ 800
Prepaid expenses	$ 3,600	Utilities payable	$ 680
Office Stationery	$ 360
	$ 107,900		$ 31,480
Non-Current		Non-Current
Land and Buildings	$ 360,000	Long-term debt	$319,200
Office Equipment	$ 18,000		$319,200
Accumulated Depreciation – Office Equipment	$ (1,350)
Office Furniture	$ 3,000	OWNER’S EQUITY
Accumulated Depreciation – Office Furniture	$ (75)	Owner’s investment	$164,500
Computer Equipment	$ 4,500	Drawings	$ (5,200)
Accumulated Depreciation – Computer Equipment	$ (338)	Retained earnings	$ 10,158
Motor Vehicle	$ 30,000
Accumulated Depreciation – Motor Vehicle	$ (1,500)
	$ 412,238		$169,458

	$ 520,138		$520,138

Every business has some setup structure and forms in which it is run. The two such common forms are sole proprietorship and proprietary limited company. Let’s discuss these forms in details.

Sole proprietorship is an individual business setup in which the owner or sole proprietor is responsible for everything be it income, expenses, assets, liabilities, profits or losses. The profit earned or loss incurred belongs to the owner only. The biggest disadvantage of this kind of structure is that it bears an unlimited liability status. It means that, in case the proprietorship is not able to pay the dues of the business, than the owner will be personally liable for all the dues. In other words, the personal assets of the owner can also be attached in case of bankruptcy of proprietorship firm.

Another form of business structure is proprietary limited company. This form enjoys the benefits of proprietorship structure along with the benefit of limited liability. Meaning thereby the liability of shareholders is limited to the amount of capital contributed by them. In case of default by the company in payment of its dues, then the shareholders are liable for payment up to the amount of capital contributed by them only. This structure can have one shareholder or director or multiple shareholder or director.

In the given case, the Park has concerns regarding the unlimited liability status of a sole trader and thus wanted to move on proprietary limited company. Further, she will be the only shareholder and director of the company. Basis on above discussion, it will be beneficial for the Park to move onto the proprietary limited company, as she is the only shareholder or director, means the entire profit or loss will be of her, further her liability will become limited to the extent of capital contribution made by her. However, this facility of having limited liability can be taken away in few cases. In other words, in following cases, the directors are personally liable for the dues of the business and their liability status becomes unlimited.

These cases are as below:

Company’s Insolvency(Corporations Act, 2001) – Insolvency or bankruptcy is the situation when the company’s debts become greater than the company’s assets, and the company is unable to settle its debts from the available resources. If a company has become insolvent or is near to insolvency and on investigation it is found that the director or directors are involved in wrongful trading or they have not acted as per their duties or have committed breach of their rights, then they become personally liable for the debts of the company. It is always believed and expected from the directors that they act in the interest of the creditors/ company, and their acts or actions are in the benefit of creditors/ company, but if it is found that they have acted in their personal benefits or against the interest of the creditors, then it is said that they have committed breach of their duties. This breach is covered under Corporations Act, 2001 and civil and criminal provisions are applied against them. (Asic.gov.au, 2018)
Personal Guarantee(Personal Property Act, 2009) – In some situations, the directors give their personal guarantee for the business transactions such as loan taken by the business from bank on the basis of personal guarantee of the directors. In such situations, if the business founds unable to settle the aforesaid obligations, then the director will become personally liable for the entire loss or obligation as they have given personal guarantee for the same. (Company Debt, 2018)
Arbitrary transactions for the benefit of directors(Corporations Act, 2001)- If the director is found involved in a transactions which was for the benefit of the directors or directors relatives/ associates etc. then the director will be liable for any loss suffered by the company on such transactions. For instance, granting of a deal for purchase of materials at a higher price to the company or business in which director have substantial interest or is a director or shareholder. In such case, the loss due to extra money paid to the related vendor is a loss to the company and the director will be personally liable for the same.
Unpaid employees taxes– if it is found that the directors have made any default in payment of PAYG withholding tax or superannuation contributions of the employees by due date, than the directors will be personally held liable for such loss. (Rapsey Griffiths, 2018)
Debts while company acting as a trustee – In case the company is acting as a trustee and the company suffers from losses in such transactions, than the directors becomes personally liable for such los

References:

Company Debt. (2018). Can Directors Be Personally Liable For Ltd Company Debts?. [online] Available at: https://www.companydebt.com/articles/could-you-be-held-personally-liable-for-your-business-debts/ [Accessed 13 Aug. 2018].

Rapsey Griffiths. (2018). 5 reasons a company director could be made liable for its debts. [online] Available at: https://rapseygriffiths.com.au/blog/director-liable-compadebts-insolvency-newcastle-nsw/ [Accessed 13 Aug. 2018]

Asic.gov.au. (2018). Directors’ liabilities when things go wrong | ASIC – Australian Securities and Investments Commission. [online] Available at: https://asic.gov.au/for-business/your-business/tools-and-resources-for-business-names-and-companies/asic-guide-for-small-business-directors/directors-liabilities-when-things-go-wrong/ [Accessed 13 Aug. 2018]

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